2006-Sept-NewYorkTimes-Condo-Hotels-in-Miami by ajizai


									                                           Real Estate

    In Miami, Condos and Hotels Now Wed in
    Higher Style

                                                                                                    Canyon Ranch
    SELLING A LIFESTYLE Plans for Canyon Ranch Living, left, include renovating and adding onto the
    1950’s-era Carillon Hotel on Miami Beach, below top.
    Published: September 24, 2006

    DR. STEPHEN MEISEL, a radiologist in Los Angeles, had not heard of a
    condo-hotel until a year and a half ago when he checked into the Ritz-
    Carlton in Key Biscayne, Fla. Because of a reservation mix-up, he and his
    family were given a condo-hotel unit, a privately owned apartment rented
    by the hotel, instead of a hotel guest room. “I said, ‘What is that?’ I had no
    idea,” Dr. Meisel recalled.

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                                                                                    Alex Quesada for The New York Times
    The lobby of the luxury condo-hotel will feature a three-story sculpture made of mangrove branches,
    designed by the architect David Rockwell, and an igloo in the 70,000-square-foot “leisure and lifestyle

    But Dr. Meisel was so impressed with the condo, which had a kitchenette, a
    washer-dryer unit and an ocean view, that he quickly bought a two-bedroom
    unit in the building for $1.8 million. Then he bought an adjoining studio for
    $500,000 and a one-bedroom for $650,000. Eight months later he picked
    up two preconstruction units, a studio for about $900,000 and a one-
    bedroom for about $1.2 million, at the W condo-hotel on South Beach.

    While sales of homes and condominiums in much of Miami’s real estate
    market are sagging, many buyers are gambling on a new style of condo-
    hotel property that is backed by design-conscious hotels and located on
    expansive lots on Miami Beach. Although condo-hotels have been around
    for decades, it is only recently that trendsetting hotels have entered the
    field: besides the W, other boutique brands heading south include the
    Gansevoort, Canyon Ranch, the members-only SoHo House and the Regent.

    Miami is attractive for condo-hotels, said Michael Achenbaum, president of
    the Gansevoort Hotel Group, because it draws young, affluent tourists — the
    kind who would stay at the Hotel Gansevoort in New York’s meatpacking
    district. “I wouldn’t buy a condo-hotel in Tulsa,” Mr. Achenbaum said.
    “Nothing against Tulsa, but it doesn’t get the same occupancy and premium
    room rates.”

    A condo-hotel in Miami can cost as much as a regular condominium. But
    because the unit can be rented when the owner is absent, with the revenue
    split 50-50 with the hotel, after service fees are paid, buyers hope to earn

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    income from hotel guests. That was why Patrick Simeon, a real estate dealer
    from Queens, N.Y., bought a one-bedroom five months ago at the
    Gansevoort, paying $900,000. “The area and the hotel are known for luxury
    and restaurants and parties,” Mr. Simeon said. “With a place like that, you
    will always make money.”

    Most of the new condo-hotels are north of Miami Beach’s quaint Art Deco
    district, known for its low-rise buildings, dense traffic and vibrant street life.
    The newcomers are on a section of beachfront above Collins Avenue and
    21st Street that was home to high-rise hotels and condo towers dating from
    the 1950’s to the 1970’s. The large lots appealed to developers who needed
    room for spas, sports facilities and more towers.

    The amenities planned for the new condo-hotels are flamboyant, even by
    Miami standards. At the Gansevoort South, a makeover of the old Roney
    Plaza Hotel, rooms will be swathed in gray suede, and the pool area décor
    will include flaming fire pits at night. The $435 million W, a new 19-story
    building, will feature black ceramic floors in the rooms and a Bliss Spa.

    Meanwhile, Canyon Ranch Living, a renovation of and addition to the
    1950’s-era Carillon Hotel on Miami Beach, features a three-story sculpture
    in the lobby made of mangrove branches, designed by the architect David
    Rockwell, and an igloo in a 70,000-square-foot “leisure and lifestyle space.”
    The Regent features a glass-bottom pool.

    Yet it is unclear whether these condo-hotels will make money from rentals
    or eventual resale. There are no reliable data on a secondary market for
    condo-hotels, and rental rates and occupancy levels fluctuate with industry
    cycles. Even thriving tourist towns like Miami have off seasons, and
    Florida’s fierce tropical storms can dampen visitor numbers.

    “If you only consider rental income and expenses, it’s hard to justify buying
    these properties at these prices,” said Joel Greene, president of Condo Hotel
    Center, a real estate agency in Miami. Mr. Greene advised that, instead of
    expecting cash flow, would-be buyers should regard condo-hotels as a type
    of “hassle-free real estate ownership” and a second home that has a
    likelihood of appreciating in value.

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    Dr. Meisel, 62, said he was just about covering costs, with down payments
    of 20 percent to 30 percent, at his first condo-hotel units at the Ritz-
    Carlton. He expects to do at least as well at the W because of its flashier
    image and ocean frontage on Collins Avenue, where an aging Holiday Inn is
    being demolished to make way for the hotel.

    Nely Galán, a 42-year-old television producer in Los Angeles who bought at
    Canyon Ranch, is counting on rental income, too. Two years ago, she paid
    around $500,000 for a unit designed for disabled use after seeing plans for
    the hotel’s “wellness community” on the beach. A year later she bought a
    larger, regular condo unit, with a lanai, for $1.9 million, in the mixed-use

    Long a devotee of the hotel’s spas and spiritual retreats, Ms. Galán figures
    she will use the condo, and possibly live there part of the year, and have no
    trouble renting the smaller unit, which has special features for people with
    disabilities, including a larger bathroom and wider hallways.

                                                                                                 Gansevoort South
    In With the New The Gansevoort, a New York trendsetter, is moving south with plans for a condo-hotel in

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                                                                                               Yabu Pushelberg Designs
    The W, above, will bring its flashy image to the oceanfront on Collins Avenue, after an aging Holiday Inn,
    below, is demolished.

                                                                                    Alex Quesada for The New York Times

    “People who come to Canyon Ranch want a healthier lifestyle, and they are
    older and wealthier,” Ms. Galán said. “Even if they are not disabled, who
    wouldn’t want a bigger bathroom?”

    Developers like condo-hotels because selling preconstruction units helps
    them finance projects. Canyon Ranch, at $500 million, includes three
    towers and 600 units, including a hotel, a condominium and 151 condo-
    hotel rooms. “Basically developers are selling the air up front and can use
    the money for construction costs,” said Jan D. Freitag, a vice president at
    Smith Travel Research in Hendersonville, Tenn.

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    For owners, however, fees can be steep. Costs include property taxes,
    maintenance charges, homeowner’s insurance and, most probably, a
    mortgage. Moreover, a service fee as high as $125 a day — for a two-
    bedroom at the Gansevoort South — is deducted from the gross rental
    revenue to reimburse the hotel for administrative costs.

    In Florida, hurricane insurance premiums, which have more than doubled
    in the state over the last year, are another factor to consider. These costs are
    absorbed by the developer but may be passed on to owners in higher
    maintenance fees.

    In addition, if condo-hotel owners join the voluntary rental program they
    must book in advance: 45 days’ notice is required at the Gansevoort. Rental
    rates are set by the hotel, and developer-owned hotel rooms are usually
    given priority over owner rooms when parceled out to guests. Although
    room furnishings are uniformly high quality, individual decorating is not

    So far, sales have been brisk, developers say. Two years ago, Canyon Ranch
    sold out all units within six months at prices ranging from around
    $500,000 to $1.5 million. “Those who understand Canyon Ranch were
    drawn to it,” said Philip Wolman, chairman of WSG Development, a partner
    with Canyon Ranch on the project.

    The W is also attracting those who enjoy the hotel’s style. Gary Brecka, chief
    executive of Life Asset Group, a life insurance company in Miami, paid just
    under $2 million for a 1,900-square-foot, two-story bungalow at the W
    South Beach. Besides the private “infinity-edge” pool and ocean views, Mr.
    Brecka, whose main residence is just a few miles away, said he liked “the
    atmosphere and European energy” at W hotels.

    While sales of existing condos in Miami fell 37 percent in July compared
    with a year ago, according to the Florida Association of Realtors, the W has
    sold 63 percent of its condo-hotel inventory since January. Marketing began
    last December with a W-sponsored event during Art Basel Miami, an annual
    art fair that attracts a wealthy crowd.

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    David Edelstein, principal of Tristar Capital, a co-developer of the W South
    Beach, contends that the beachfront location and the W hotel chain’s
    reputation will trump any downward trend. In a softening market, Mr.
    Edelstein said, “I have always believed that Miami Beach oceanfront is
    immune, or at least, a last bastion of strength.”

    Demand was so strong for the W’s larger, more expensive units, Mr.
    Edelstein added, that many one-bedrooms were combined to create larger
    configurations with dens, reducing the overall number of condo-hotel
    rooms to 419 from 511.

    Still, Mr. Freitag, of Smith Travel Research, cautions that condo-hotels
    historically have a high attrition rate between planning and completion.
    Competition is growing, with around 50 projects currently in various stages
    of development in the Miami area. While it is unlikely that a well-financed
    hotel chain will abandon a project, Mr. Freitag says there are unanswered
    questions about this type of real estate.

    “What if the hotel industry doesn’t do well and a hotel pulls the flag?” Mr.
    Freitag said. “You might be left owning a piece of the lobby of a different
    hotel. It can get messy very quickly.”

    For his part, Dr. Meisel, the Los Angeles radiologist, said he was focused on
    the long-term financial prospects of his condo-hotel units and the chance to
    vacation at different locations. “With five properties you can move around
    and keep the rest rented,” he said. “I’m not concerned about any potential
    drop in value. They will both be good investments.”

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